A squid proxy should be on a dedicated machine, not on a Server.
It's possible, but probably foolish, to use Cygwin to get it to
run the proxy server via a Windows machine. If you want a
Windows solution, you should look at something like wingate or
CCproxy. There are a ton of proxy servers for Windows users.

Anyway, should you decide to use a Squid proxy server, your basic
configuration file is squid.conf - typically located under
/usr/local/etc/squid or /etc... There are free online resources
for each directive and how to configure a basic proxy server,
but you'll need to make a few decisions on how you want to
configure it first. You can do it as a "normal" proxy,
transparent proxy, or one that requires authentication for every
connection. Depending on what you are looking for, you can do a
Google search to determine the configuration necessary to make
it work.